A reader wrote in, wanting to share this experience in case it’s helpful to anybody else who has recently purchased I Bonds for the first time. “I purchased $10K worth of I-Bonds for the first time in 2022, specifically on July 1st, when the annualized interest rate was 9.62%. Funds left my bank account on that same day, July 1st. Fast forward to mid-January; using straight-line logic, I’m expecting to see $481 posted into the account, perhaps a few bucks less, but only associated with timing issues. I didn’t expect to see only $236 posted (???) Could not work the math, any which way. Called the Treasury Department, waited almost two hours on hold before talking to a human … [Read More...]

A quick housekeeping note, with regard to my new book: Please feel free to submit any follow-up questions that you think might be useful as future articles. If you liked the book, I’d be super appreciative of a review on Amazon given that the book is very new still. If you didn’t like the book for any reason, please let me know. As with any of my books, I’m happy to provide a refund. When it comes to retirement spending, the most famous strategy is the “4% rule” in which you do not actually spend 4% of your portfolio balance per year, but rather spend 4% in the first year and then increase that dollar amount with inflation every year, regardless of … [Read More...]

The SECURE Act 2.0, signed into law 12/29/22, made a long list of changes to retirement accounts. The two best write-ups I’ve seen so far are from Jeff Levine and Jim Dahle. Jeff Levine’s article provides a deeper discussion of most of the provisions relating to retirement accounts. Jim Dahle’s article provides very brief explanations, but covers more of the provisions. And of course reading the legislation for yourself can be informative. (The link above will take you to text of the whole Consolidated Appropriations Act, 2023. Do a search for “Division T” on that page to get to the SECURE Act 2.0.) Other Recommended Reading Wells Fargo to Pay $3.7 billion Over Consumer Law Violations from Ken Sweet How to Find Clarity When You’re … [Read More...]

Interest from Treasury bonds is exempt from state income tax, and that’s just as true for interest from Treasury bonds held by mutual funds that you own. But as Harry Sit points out this week, the 1099-DIV the brokerage firm sends you doesn’t tell you how much of the dividend distribution from a fund is from Treasury bond interest. If you don’t go look it up yourself, you can end up paying unnecessary state income tax. State Tax-Exempt Treasury Interest from Mutual Funds and ETFs from Harry Sit Other Recommended Reading Worried About Social Security’s Future? Make A Plan For When To Start Your Benefits from Steve Vernon People Aren’t Buying Disability Insurance, But They Should from Jim Dahle Perfect is the … [Read More...]

Monte Carlo simulations are a popular way to determine how risky a given level of spending is, for a particular set of household circumstances (i.e., assets, age, other sources of income, etc.). Different software will do such simulations differently — and provide different output as well. But the most common form out output is to show a probability of success/failure — that is, in what percentage of the simulations did the household end up depleting the portfolio before the desired length of time had elapsed. As David Blanchett discusses in a recent article, many “failure” scenarios wouldn’t even occur in real life. In part, that’s because people tend to cut their spending, if they see that it doesn’t look like … [Read More...]

Much of retirement spending research — as well as many financial planning programs — assume that a retiree household will keep spending the same (inflation-adjusted) amount each year throughout retirement. But common sense tells us that retirees probably would not keep spending the same amount, regardless of whether the portfolio is growing quickly, shrinking quickly, or holding steady. David Blanchett highlights a recent survey of 1,500 defined contribution (DC) retirement plan participants between the ages of 50 and 70, which found that respondents were much more capable of cutting back on different expenditures in retirement than the conventional models suggest. Blanchett writes, “For example, only 15% said a 20% spending drop would create ‘substantial changes’ or be ‘devastating’ to their retirement lifestyle, while 40% said it … [Read More...]